Hello all, this is my first post on the wonderful LvMI forums so please be gentle with me!
Firstly, after graduating from university in June, I have been fascinated with free-market ideas (Milton Friedman started my inquisitiveness!) and I certainly feel that I’ve learnt a lot and my mind has become freer (I use to be a liberal democrat, urgh!). I think I might have found my true love - freedom!
Anyway, enough of the sappiness.
I am debating this self-confessed social democrat and “economic pragmatist” (which I suspect is code for blissfully ignorant of economics!). His argument is that for competition and flourishing of small businesses, government should impose a progressive tax across businesses such that a higher taxation on big businesses will force their prices to rise and so they are then priced out of the market and the smaller businesses (which have been paying a proportionally lower tax) can undercut and become more competitive.
I would argue that if his goal is to help small businesses then government should impose no tax whatsoever on them. However, I suspect he can’t give up on the idea of a business not paying its “fair share”.
Since prima facie, there doesn’t appear to be anything wrong with his reasoning and deductions. I was wondering what attack I should use? It seems like I could use a Bastiat argument of what is not seen. But how should I go about this? Basically I’m asking for a refutation of why progressive taxation doesn’t result in its intentions.
Your opponent wants to overrule the choices of consumers and producers by taxing successful companies. Firms flourish by serving consumers. Firms that displease consumers lose market share, maybe go out of business. By the way, taxation is theft.
Most of us here are radicals (I hope!), so our first response will be that taxation is theft, and theft should not be supported. But I recognize this is so far from his position that it might not get the debate you are hoping for to start.
First point: it’s a pipe dream to hope that government will function in this way. The rich and powerful tend to get their way more than the relatively poorer, not to mention the relatively more numerous who therefore have significantly higher transactions costs to their lobbying.
Next point: Did not small businesses flourish just fine before the income tax?
Next point: the proper size of firms in an industry can only be determined through the market discovery process. If he taxes the larger firms, then the firms will be smaller than their optimal size. What if some things are better done through large firms?
Hey! Welcome to these forums! I hope you have a long and productive stay where you will be bathed in economic knowledge and clear-headedness.
I think one of the simpler things to argue is to ask “why are smaller businesses necessarily better?”
Is “competition” not simply patronizing businesses with the lowest costs (since we assume something close to a neoclassical theory of the firm) which leads to the lowest price? It seems like taxing large businesses more actually creates inefficiencies and resource misallocation because the costs of large businesses are artificially increased. This affects the price of consumer goods, which affects most greatly the poor.
This is a simple, off-the-top-of-my-head argument, but not too shabby, imo.
Perhaps you could start with (possibly) simpler battles to fight. For example, show how the existence of the Fed increases inequality and helps the rich bankers. Then show that subsidies go to gigantic businesses which drive out smaller ones.
The guy obviously knows nothing about economics. Even a mainstream econ textbook should shed him of his ignorance.
Gocrew - remember that the morality of private property is not provable… I hope that the right-lib definition of the NAP is the only consistent universally-palatable theory possible, but private property as we define it is not objectively moral
I understand the raison d’être for “taxation is theft”, but I live in jolly-old tryrannical, the state is right, “we love monarchy and statism”, freedom-hating UK and that line of reasoning is fiercely hated and despised (I have tried it - they don’t understand voluntaryism). At least America was conceived in freedom and liberty (albeit not of an anarchist flavour) and so taxation has a history as being viewed of as theft (XVI amendment 1913, income tax UK - 1798!).
Too complicated. I’d suggest a much faster and cleaner way for satisfying his fetish for small business: the government should just confiscate all businesses larger than size X.
But anyomne who argues against it accepts it, implicitly. So I don’t need to prove it to them!
How so? Self-ownership, maybe. But what about owning the means of production, for example? Or land, for that matter? Are you trying to use some form of argumentation ethics?
I am not yet ready to declare unconditionally for AE, because I haven’t read any really careful critiques of it. But my instinct is to lean in that direction, as of right now.
Haha. I read AE and thought it meant “Austrian Economics”, so I was gonna say that Arg Eth isn’t part of Aus Econ. Lol.
But yeah, Arg Eth has been thoroughly critiqued before. I am not sure whether this is the article I was reading before, but here is one by Murphy and Callahan:
i.e. a marginal tax rate of 100% over $X. I wonder how he would respond to that (given that he is an “economic pragmatist” - which by the way, can anyone define ?!).
To what end, other than the flourishing of small businesses?
And I agree with the above, that the rich, being rich, can get around these kinds of clever solutions. If you can’t have one large business, what about many small businesses? There also seems to be a whole lot to do before approaching this tax solution, such as abolishing subsidies and licensing restrictions. Get that stuff done, and if he still sees a “problem,” then start talking about a clever taxing scheme.
So, is there anything to counter the charge that “progressive taxes help small businesses”? As I said, with my opponent’s reasoning it prima facie sounds ok. But what is the real expense? The expense of big businesses, the consumer? Or am I going down the wrong route here?
